Babcock agrees £1.6bn deal for helicopter firm Avincis

FTSE-100 engineering services group will launch £1.1bn rights issue to fund
largest deal in its history.

BABCOCK International the engineering and defence support giant yesterday announced the biggest acquisition in its history when it agreed terms on a £1.6bn deal to buy helicopter firm Avincis.

Babcock International Group

The FTSE 100-listed group will ask investors for £1.1bn, the largest UK rights issue this year and second largest in Europe, to fund the deal and pay £920m up front for the company and take on £705m of its debt.

Peter Rogers, chief executive of Babcock said “I’ve walked round the Avincis operations many times and I think it fits brilliantly with Babcock”.

London-headquartered Avincis runs a fleet of 343 aircraft, providing air ambulances and police helicopters to the emergency services in 10 countries from Norway to Australia.

The deal, which took 15 months to finalise, was nearly derailed in December of last year, when a police helicopter being operated by Bond Offshore, an Avincis subsidiary, crashed into a Glasgow pub, killing nine people.

Avincis is being sold by World Helicopters, a company joint owned by US firm private equity firm KKR.

The rights issue will see Babcock offer all existing shareholders five new shares for every 13 existing shares, at 790p per share, or a near 35pc discount to the current price. The rights issue has been fully underwritten by JP Morgan Cazenove, Jeffries, Barclays and HSBC, who will share about £45m in fees.

Mike Allen, analyst from Panmure Gordon, said: “We estimate that Babcock has paid 14 times Ebitda, which is clearly not cheap.” Investec analyst John Lawson called the price “eye catching” but added that the helicopter business was growing fast.

Babcock is also expecting announcements on two major contracts within days. Decisions are expected for the £800m London Fire Brigade training contract and £2.5bn in Magnox nuclear decommissioning work by next Monday.